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Israeli Companies Traded On US Exchanges Stand Out With Gains Exceeding 200 Percent

Disclosure: I have no position in any of the stocks mentioned in this post and no plans to initiate positions in the next 72 hours.

Investors able to stomach the risk of uncertain geopolitical conditions and volatile markets were richly rewarded this year—especially if they made speculative bets on small Israeli companies.

For years, Israeli technical talent has been treated like a farm team by major industry players. Behemoths like Hewlett Packard, Intel and Microsoft opened Israeli subsidiaries and picked off choice companies. Now, as more Israeli companies find their footing in the public markets, ordinary investors are seeking to profit from Israeli expertise in math, science and software.

Roughly half of the Israeli companies listed on the AMEX, NASDAQ and NYSE stock exchanges are poised to close out 2013 with gains of 30 percent or higher. The value of nine companies more than doubled, three tripled, one quadrupled and one microcap specializing in digital identity solutions increased a whopping 3,000 percent.

Following is a guide to the five best-performing Israeli companies measured by an increase in market valuation.

SuperCom—up 3000 percent. Remember the days when the evening newscast asked where your children were? SuperCom has the answer. A microcap with a total value of $40 million as of Thursday’s market close, SuperCom offers technology for electronic monitoring and digital identification.

SuperCom incorporated in Israel in 1988. In fiscal 2012, the company reported revenues of $8.9 million, an increase of 13 percent over the prior year, with an adjusted net income of $3.1 million income. Driving the recent surge in the company’s stock are on-going turnaround activities, the acquisition of a competitor, the smart ID division of On Track Innovations, announced in August, and the return of SuperCom to the NASDAQ in September.

Pointer Telocation—up 345 percent. If Pointer Telocation is successful, car thieves may become a dying species. A microcap with a total value of $64 million as of Thursday’s market close, Pointer Telocation provides command and control technologies to the automotive and insurance industries, including services for asset tracking, fleet management and stolen vehicle retrieval.

The company was incorporated in Israel in 1991. For the year ended December 2012, Pointer reported revenues of $84.8 million, a decrease of 1 percent from the prior year, and net income of $1.6 million, compared to a loss of $8.4 million for the prior year. In November, Pointer reported that third quarter revenues had increased 21 percent to $24.4 million and said annual revenues for 2013 were on track to exceed $100 million.

B Communications—up 286 percent. B Communications makes it easy for telecom investors to dial into Israel’s biggest telco. A small cap with a total valuation of $525 million as of Thursday’s market close, B Communications is a holding company whose sole asset is a controlling stake in Bezeq, Israel’s largest telecommunications group. This makes B Communications primarily a vehicle for U.S. investors to own Bezeq, which is traded on the Tel Aviv Stock Exchange. In November, the company began paying a dividend of 3.41 Israeli shekels, or about $.98, for a dividend yield of about 5 percent.

Arotech—up 259 percent. Napolean’s army may have marched on its stomach, but modern militaries require electricity. A microcap with a total valuation of $57 million as of Thursday’s market close, Arotech incorporated in Delaware in 1990 under the name “Electric Fuel Corporation.” Today it operates three subsidiaries in the United States and Israel. FAAC Incorporated, located in Ann Arbor, Michigan provides simulators, systems engineering and software to the U.S. military and other customers. The Electric Fuel Battery Corporation located in Auburn, Alabama and Epsilor-EFL, located in Beit Shemesh, Israel provide lithium and zinc-air battery and power systems.

For the year ended December 2012, Arotech reported revenues of about $80 million, up 29 percent from the year before. Its net loss of $2 million was down from $5 million the year before. Underscoring the company’s improving financial position, Arotech recently signed a $3 million agreement to supply the Saudi Arabian defense forces with its MILO range simulators, as well as $700,000 deal to develop special battery chargers for drones. During the last three months, Arotech’s stock soared 100 percent.

CaesarStone Sdot-Yam—up 202 percent. Imagine your dream home. Does it have beautiful, durable, easy-to-clean surfaces? Then you may soon join CaesarStone’s growing list of customers. A small cap with a value of $1.7 billion as of Thursday’s market close, CaesarStone manufactures premium quartz surfaces, including kitchen countertops, table tops, and bathroom vanities. It estimates that it controls 8 percent of the global market for quartz surfaces.

Founded in 1987, the company completed an IPO on the NASDAQ exchange in March 2012. Since then, its stock price has quadrupled.

For the year ended December 2012, CaesarStone reported revenues of $297 million, up 14 percent from the previous year. Adjusted net income rose 26 percent to $44 million. Growth has since continued. In the third quarter, revenues jumped 22 percent to $94 million while net income climbed 18 percent.

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